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Will Amazon’s Bid for Live Sports Affect Netflix?

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Dec. 19 2016, Updated 9:06 a.m. ET

Netflix is staying away from live sports

Netflix (NFLX) is the clear leader in terms of on-demand video streaming, but it currently has no presence in live sports streaming. Netflix stated in an earnings call that it didn’t consider live sports streaming to be as attractive an opportunity as news programming, but it also stated that it would be interested in a business model in which it could create its own sports league.

Netflix had said in an earlier earnings call that rather than investing in sports programming, it believed in producing content with a broader, more global appeal such as The Crown, a show about Queen Elizabeth.

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Rationale behind staying away from sports programming

Netflix could be staying away from live sports programming because it’s an expensive business. Sports broadcasting rights are expensive. Even established incumbents such as The Walt Disney Company’s (DIS) ESPN are facing intense competition for rights from 21st Century Fox’s (FOXA) Fox Sports and Comcast’s (CMCSA) NBC.

As the chart above indicates, according to a PricewaterhouseCoopers report, the cost for sports telecasting rights is expected to rise at a compound annual growth rate (or CAGR) of ~5.3% between 2015 and 2018. It’s expected to be $19.3 billion in 2018.

However, Amazon’s bid for live sports, if successful, could result in Netflix’s rethinking its stance.

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